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Roundtable on Africa’s relationship with China, EU and the US

A participant sharing her views during a roundtable meeting on Africa's relationship with China, US and EU held at the Sarova Panafric Hotel on 28 June, 2016. Photo Credits: Oscar Ochieng

The Institute of Economic Affairs held a roundtable on China, US and EU Policy, Trade and Investment Relations with Kenya on June 28, 2016 at the Sarova Panafric Hotel. The objective of this meeting was to present preliminary results of the study dubbed ‘China Studies’ examining key policy areas of: Aid Relations, Political Economy and its Implications on Governance for Kenya; Food Security Impacts of Kenya’s Trade; Trade and Investments trends between Kenya - China, Kenya - EU and Kenya - US and further establish the impact of these investments on Kenya’s economic growth. The participants later on stimulated a debate on which development partnerships options work best for Kenya and provided their views on what these development co-operations means for Kenya whilst musing, what next?

Trade and investment relationship between Africa and China is growing at breakneck speed and it is visible everywhere in the construction and infrastructure sectors, educational support, military cooperation, aid for trade. The Chinese government has funded mega projects in Kenya and Africa in general,and key among them are; Standard Gauge Railway (SGR) at a cost of $13 billion, hydroelectric power plant (HEP) in Western Kenya to a tune of $65 million contract to Sino-hydro Corporation.

Trade between China and Africa has grown remarkably in recent years. Between 2011 and 2015, the average growth of exports from China to Kenya increased by 27 percent. In sum, China is now the Africa’s biggest trading partner.

Chinese overseas investment has often been viewed with suspicion for lack of political and economic reforms. The Chinese demand for raw materials especially oil and mineral resources are often quoted as the reason behind the increasing interest in Africa’s untapped natural resources.

During the meeting, speakers highlighted pertinent concerns and the most salient was that our local job content and technology transfer remains a big challenge. Whereas countries such as South Africa negotiated with General Electronic (G.E) to have the $1 billion investment deal nature local manpower within 15 years. The lack of skills transfer in Kenya will negatively affect what is already constructed in terms of maintenance which is still done by the Chinese. Therefore, it is important for the government to negotiate better terms with these contractors as such to build local expertise contracted by the Government of Kenya.

China serves from low quality to high end products. While Kenya is a low quality consumer, China sees this as an opportunity for doing business. “The upsurge in low price products retards the growth of local industries and creates overreliance on low quality imports from China,” said Victor Ogalo, Head of Policy Research and Policy at KEPSA. “China is known for its low price mass market production, owing to its absolute advantage in labor costs and resources, which has the effect of making business difficult for the local producers dealing in rival merchandise,” he quipped.

The ensuing competition between the West and China over investment opportunities in Kenya and other African countries may push Western countries from the continent thus raising the risk of low Foreign Direct Investment (FDI) and other economic engagements.

There were also concerns over the lack of transparency and adherence to internationally-accepted standards of governance, property rights and environmental regulations when it comes to Chinese investments in Africa.

Accessing data has been a challenge. However, the IEA is working with the available data to give a conclusive comparison between China-EU-US Africa cooperation. The report is set to be launched later on in the year.